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Globalisation and
international marketing
A Activity 19.1 − answer provided on Student’s CD-ROM.
Activity 19.2 (page 374): Zumo the energy drink
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As a business analyst, write a report to Zumposa’s board of directors recommending
an appropriate marketing strategy for this product in your country. It should contain:
explanations of global marketing and localisation; advantages and disadvantages
of both strategies for this product in your country; details of the changes you would
recommend for the marketing strategy in your country. Don’t forget that your
marketing strategy should be integrated. [20]
Global marketing:
A pan-global
marketing strategy
adopts common
products, branding
and promotional
campaigns across
the world.
Advantages
Disadvantages
• There will be economies
• The brand name may
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of scale as the product is
the same in each country.
Therefore, purchasing
economies of scale can
be utilised. No need for
different flavours of Zumo.
Promotional costs will
be reduced as the same
advertising is used
everywhere – thus no need
to commission different
adverts in different
countries. Advertising
already used in Spain can
simply be translated for
other markets.
The economy is
increasingly globalised and
there are fewer and fewer
differences between tastes
in countries around the
world.
The product may benefit
from a common global
identity. This has worked
well for Coca Cola.
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not be suitable in all
countries, e.g. Plop,
a popular Swedish
chocolate bar, would
struggle in the UK
market. Does this apply to
Zumo?
Cultural and social
differences exist between
countries. Zumo may
lose sales by trying to sell
the same product in all
countries.
Economic differences
between countries are
significant. Will Zumo be
too expensive in lessdeveloped countries?
Advertising may lack
appeal if it is based on
sports stars famous in
Spain – these stars may
be relatively unknown in
Asia or South America.
There are few globally
recognised sports stars.
(Continued)
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Global localisation
involves selling
products on a
global scale but
being responsive
to local needs.
Thus, promotion
would be adapted
to local needs, as
would price and
promotion.
Advantages
Disadvantages
• The marketing mix will
• There will be increased
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be more effective as it is
adapted to the needs of the
local market.
Zumo is more likely to
meet legal requirements
in each country if it is not
standardised. For example,
laws in the USA regarding
food labeling and additives
are stronger than in
Europe.
The product is less likely to
face an anti-globalisation
backlash from consumers.
Zumo is seen as a Spanish
product. This may hinder
sales in Asia and other
parts of the world.
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costs of adapting the
product and marketing
to the needs of the local
market. Thus price may
be higher.
There is a reduced scope
for economies of scale.
Different flavours are
being produced, reducing
the scope for purchasing
economies.
Your marketing strategy will need to identify the 4Ps:
Product:
• Is the current product suitable? Is there a need to introduce different flavours to
meet the needs of customers in your market?
• How should the product be packaged? What is typical in your market?
Pricing:
• To what extent should the price be influenced by competition and the per capita
income of the country?
Promotion:
• Which sports are popular in the country? Are there well-known sports
personalities?
• Are there cultural factors essential to the advertising of the product?
Place:
• Should the product be exported directly or should intermediaries be used?
Branding:
• Is the name suitable or should a local brand be developed?
Revision case study 1 (page 375): McDonald’s – pan-global
strategy or global localisation?
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Explain the likely reasons why McDonald’s decided to enter international markets. [8]
Reasons include:
• Growth is a common objective for businesses to adopt. By operating in
international markets, the potential for growth is increased. Growth rates in the
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USA may have slowed by the 1970s, so in order to maintain McDonald’s sales
growth it was necessary to move into international markets.
The domestic market may have been saturated and offered no further prospect
of growth.
There would be a need to build shareholder value through increasing the size of
the business.
By entering international markets they would be spreading risks. A presence
in international markets reduces the dependency of McDonald’s on the US
market. Therefore, if there is a decline in sales in the USA due to worsening
economic conditions, the business may still have good sales growth in other
markets. For example, in 2008 McDonald’s growth rate was only 4.3% in the
USA, whereas it was 9.9% in Asia, the Middle East and Africa.
Foreign markets may offer opportunities for high-profit growth. Europe has high
income levels and so would have been an attractive market. Further, there may not
be much competition in new markets where this type of fast food has not been seen.
Discuss the advantages and disadvantages to McDonald’s of initially using a panglobal marketing strategy for its restaurants. [10]
Pan-global
marketing:
A pan-global
marketing
strategy adopts
common
products,
branding and
promotional
campaigns
across the world.
Advantages
Disadvantages
• There will be economies
• Cultural and social differences
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Chapter 19
of scale as the product
is the same in each
country. Therefore,
purchasing economies
of scale can be utilised.
Promotional costs will
be reduced as the same
advertising is used
everywhere – thus no
need to commission
different adverts in
different countries.
The economy is
increasingly globalised
and there are fewer
and fewer differences
between tastes in
countries around the
world.
The product may
benefit from a common
global identity. The
McDonald’s arches
are one of the bestknown icons in the
world. Thus, they are a
powerful marketing tool
for the business.
The highly standardised
product will appeal to
many tourists travelling
the world.
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exist between countries.
McDonald’s products may
be less popular in countries
where vegetarian diets are
prevalent. Thus, McDonald’s
would benefit from adapting
menus to suit local needs. The
case refers to problems in India
where restaurant windows
were smashed as Hindus
objected to the use of beef fat.
Economic differences between
countries are significant.
McDonald’s can appear very
expensive in some lessdeveloped countries.
McDonald’s is closely
associated with the USA.
This can act as a constraint
on success in some countries.
For example, in France there
is a particularly strong desire
to protect French culture and
identity; this made it very
difficult for McDonald’s to
build its market share. In other
countries, there is opposition
to what is seen as American
business/cultural imperialism
and the homogenisation of
goods.
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Assume that a new McDonald’s restaurant is planning to open in your town. Evaluate
how and why you might adapt the company’s marketing strategy to suit local market
conditions. [14]
Any reasonable answer.
Answers should try to identify local conditions that make a change in the
marketing strategy worthwhile.
Possible changes to strategy may include:
Product:
• Is there a need to design different menus due to cultural or religious
constraints?
• Are there a significant number of vegetarians in the population? Many Hindus
are strict vegetarians and, generally, Hindus do not eat beef. Most Muslims
require halal meat.
• Will demographics influence demand? For example, a high proportion of older
people may require that McDonald’s changes its external signs and seating in
the restaurant.
• If the restaurant is to be situated in an historic town, will the external
appearance of the premises need to be different from the standard McDonald’s
look? There may be strict planning guidelines in some localities.
Price:
• Is the product affordable to local people?
• How much competition is there from established fast-food outlets in the
location?
Promotion:
• Can the product be advertised to children? In some countries there may be
restrictions on advertising as McDonald’s is seen as contributing to the rise in
childhood obesity.
• Does McDonald’s need to distance itself from its American roots?
Essay
1 a Analyse the impact of increasing globalisation on a business in your country. [10]
Answer should be business specific.
In general, answers may include comment on the following.
Definition of globalisation: this is the trend towards a single world market in
goods.
• Increased competition – this can be a significant threat. General Motors,
the American car manufacturer, has faced increased competition due to
globalisation. As a result of that competition, and the global recession
of 2008/09, General Motors was on the verge of collapse. Competition
puts pressure on firms to reduce costs and improve products to remain
competitive.
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Increased investment opportunities − firms have increased opportunities
to invest abroad, e.g. Dyson building factories in other countries. Western
European firms such as VW have invested heavily in Eastern Europe following
the collapse of communism; VW bought Skoda, the Czech auto manufacturer.
Increased market size − firms are no longer constrained by the size of the
domestic market. For example, Starbucks has expanded rapidly throughout the
world. Firms can benefit from economies of scale as a result.
Impact on operations management − many firms have been forced to move
production abroad or to outsource production, leaving the firm to focus on
product design. This has happened in the European textile industry, which
outsources the labour-intensive activities to Asia, but is more in touch with
market trends. Costs are significantly lower in other countries and legal
restrictions may be less onerous.
Supplies − firms can source components and raw materials more easily from
around the world. Thus, they are able to cut the costs of production.
Global shocks − businesses may be increasingly affected by global shocks to the
economic system. The financial crisis, which started in the USA in 2007, quickly
spread to the rest of the world and has affected most firms.
Takeovers − firms are increasingly at risk of takeover. For example, Saab, the
Swedish car producer, was taken over by General Motors (although in the
economic crisis of 2009, General Motors severed its ties with Saab).
Globalisation − this is not just about trade; it also refers to the migration of
workers. This has benefited Australia, which still suffers from a skills shortage
in the healthcare, engineering, financial services and IT sectors.
Evaluate the potential advantages and difficulties a business might experience when
selling its products in international markets for the first time. [15]
Advantages:
• There may be the opportunity to profitably expand sales.
• There may be the benefits of economies of scale, e.g. production, purchasing
and marketing economies.
• It may be possible to spread risks. A firm’s success becomes less dependent on
the domestic economy.
• It may offer the opportunity to break free from saturated domestic markets. As
a domestic market reaches saturation, the opportunity for sales growth recedes.
• International markets may not be at the same stage of the business cycle.
Thus, if the domestic market is in recession the firm may be able to look to
international markets to maintain sales.
Difficulties:
• Cultural differences may require changes to the marketing mix. The example
of the changes that McDonald’s has had to make to succeed in France is an
excellent example (see Revision case study 1).
• The firm may lack local knowledge to guide its marketing decisions. Acquiring
information may be expensive.
• There may be legal differences. Products may need to be modified to conform
to standards in the international market. Product safety standards are very high
in the USA compared with many other countries.
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Firms may face tariffs and quotas, making it difficult to compete effectively.
Securing appropriate distribution channels may be difficult and decisions must
be made about the best route to the market: Direct export? Through agents?
Franchising? Establishing retail outlets?
Further reading
Klein, N., 2001. No Logo. Flamingo
Stiglitz, J., 2003. Globalisation and Its Discontents. Penguin
Love, John F., 1995 McDonald’s Behind the Arches. Bantam
Articles on McDonald’s
Business Week:
http://www.businessweek.com/globalbiz/content/jul2008/gb20080717_293203.
htm?chan=search
New York Times:
http://www.nytimes.com/2007/08/25/business/worldbusiness/25restaurant.html?_
r=2&oref=slogin
Fortune:
http://money.cnn.com/galleries/2008/fortune/0804/gallery.big_mac.fortune/index.html
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